Liquidation vs dissolution
Liquidation and dissolution both end with a company ceasing to exist, but they are very different processes and they are not interchangeable. Dissolution, achieved through a strike off, is an administrative ending for a clean company. Liquidation is a formal insolvency process run by a Licensed Insolvency Practitioner, and the proper route for an insolvent one. Companies House; Insolvency Service
- Dissolution (strike off)
- Administrative removal from the register; solvent companies only
- Liquidation
- Formal insolvency process run by a practitioner
- Creditors
- Dissolution does not deal with them; liquidation does
- Insolvent company
- Needs liquidation, not dissolution
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At a glance
| Liquidation | Dissolution (strike off) | |
|---|---|---|
| What it is | A formal insolvency process run by a practitioner | Administrative removal from the Companies House register |
| Best for | An insolvent company with creditors | A solvent or dormant company with no real debts |
| Deals with creditors? | Yes, the liquidator pays creditors from the company's assets | No |
| Conduct review | The liquidator interviews the directors and reports on what went wrong (gov.uk) | Directors of dissolved companies can now be investigated by the Insolvency Service (Insolvency Service) |
| Cost | Set by the practitioner; ask for a written quote | A Companies House filing fee (current fees); striking off is usually the cheapest way to close a company (gov.uk) |
| If used wrongly | The proper route for an insolvent company | Striking off does not deal with creditors, and directors of dissolved companies can be investigated |
Clean company versus insolvent company
Dissolution simply removes a company from the Companies House register. It is usually the cheapest way to close a company (gov.uk) and suitable only for a solvent or dormant company with no real debts, and it does not deal with creditors or write off debts. In liquidation, the company's assets are sold, creditors are paid, the liquidator interviews the directors and reports on what went wrong, and the company is then removed from the register (gov.uk).
If the company is solvent and debt-free, dissolution by strike off is fine. If it is insolvent, liquidation is the proper route, because a strike off does not deal with creditors, and directors of dissolved companies can now be investigated (Insolvency Service). The objection risk checker is also available.
Where to go from here
- If you decide to speak to a Licensed Insolvency Practitioner, choose your own: our practitioner directory lists every practitioner on the official Insolvency Service register, and how to choose an insolvency practitioner explains what to ask. Always confirm their entry on the official register before you instruct anyone.
Common questions
Is dissolution the same as liquidation?
No. Dissolution removes a company from the register and suits solvent, debt-free companies. Liquidation is a formal insolvency process that deals with creditors. An insolvent company needs liquidation, not dissolution.